Tag Archives: affordable

It’s safe to sell your home again While analysts debate when the housing market will hit bottom, for a surprising number of cities the turnaround has already begun. In December, prices rose in 109 of the 384 metro areas tracked by data firm CoreLogic.

Making sense of the story

There are certain signs to help determine if a particular neighborhood is on the verge of a rebound. For instance is local employment on the upswing? That’s a critical factor for a region to get itself on the path to recovery. Improving jobs picture has led to shrinking housing stock across the country, as investors and bargain hunters have started buying up foreclosures that have been preventing a recovery.

For years, buyers were scared of overpaying for a home, but less so now. Many buyers have grown accustomed to thinking they’ll score deals, so they tend to act slowly, and typically start bidding around 10 percent to 15 percent below list price. However, a growing number of buyers are beginning to realize that if they wait too long in this market, they may miss out.

Sellers can hold firm on price if they’re patient. The days of having to deal with low-ball offers are coming to an end. The higher the price, the more patient the seller must be. Cheaper homes are affordable to more buyers and appealing to investors, so recoveries usually start there.

Sellers should keep in mind that while they don’t have to placate low-ball offers anymore, they also can’t shoot for the moon either. Working with a REALTOR® and setting a realistic price from the get-go is key.

Sellers should know what they’re competing against. Homeowners should let their home’s value dictate the price. While this may seem self-evident, some owners may have lost sight of it during the bust. On the one hand, some sellers clung to the false hope of a return to boom prices, so they set prices unrealistically high. Others may have gone too far the other way, and set their price too low.

It’s also important that sellers understand they’re no longer competing with gutted foreclosures. Buyers are tired of looking at worn-down, neglected, distressed properties and often don’t have much extra money to do a lot of fixing up. REALTORS® often report their clients are willing to pay a little more for a home that’s ready to move into.

The National Association of Realtors’ (NAR) Housing Affordability Index reached a record high this January, at 206.1. January 2012 is the first month since the index’s inception in 1970 that the index has hit or passed 200, the group announced this week…

…Late 2011 saw a steady monthly rise in the index from June’s 172.4, the 2011 low, to 197.9 in December 2011. The index has risen from 169.4 in 2009 to 174 in 2010, and to 184.5 in 2011.

Q: I am on a mission to buy a home. I’ve wanted to own a home my entire life, and thought I would miss the opportunity to buy while the market was down, because I had no real savings when the market crashed. I think I’m ready, though, and prices still seem low. What should I be doing now to make this happen in 2012?

A: The recession has done lots of favors for buyers-to-be, including dropping prices and interest rates to bargain levels. But it has also created a lending and housing market climate in which loans are tough to get, tensions about buying into a down market run high, and transactions are harder and longer to close than they have ever been.

Here are the things to do now, to buy a home this year:

1. Fix credit problems. More deals than ever are dying on the vine, and credit problems are a top reason home-sale transactions fall out of escrow. Detect and correct errors on your credit report now by reviewing the federally mandated free reports you can get at AnnualCreditReport.com.

2. Study up. Do some research, both online and offline, into things like:

Areas: Start your online research into decision points like tax rates, school districts, neighborhood character and even prices in various areas. Check out NabeWise.com for some local insight into neighborhood flavor and personality.

When you start connecting with local agents, ask them to brief you on neighborhood market dynamics. They can give you a deeper view into need-to-knows like how long homes typically stay on the market and whether they generally go for more or less than the asking price, so you can be smart about how you search vis-à-vis what you have to spend.

Agents: This is the perfect time to ask your family and friends for a referral to an agent they know, have used and love. Then, follow up by doing an online search for the agent’s name and seeing what sort of online reviews and activities you find. When you’ve narrowed the field down to a few, call them up and set up a meeting to find out if you’re a good fit.

Distressed properties: In some areas, more than 40 percent of the homes on the market are short sales and foreclosures, and they involve a very different timeline and set of facts than traditional home sales. Read up and talk with the agent candidates you interview about what you should expect from these types of listings, to minimize surprise and manage your expectations way in advance.

3. Save even more. Sounds like you’ve worked hard for a number of years to save enough cash that you think you’re in the clear when it comes to funding your down payment and closing costs. Studies show that after months of saving, people often let up and relax into a spending season. Even at your early stage in the process, it’s easy to start noticing and buying the furnishings and touches you want to install in your new home.

Although you shouldn’t feel deprived or forgo amazing and affordable deals on things you know you’re going to need, rest assured that no matter what amount of cash you have on hand, when you start house hunting, making offers, closing your transaction or moving in, the time will definitely come when you’ll wish you had more.

You might want to ratchet up your offer a bit to best another buyer, or you might just end up with a place that needs a little sprucing up. It might be months before you know exactly what you’ll need extra cash for, but now is not the time to press the gas pedal when it comes to your monthly spending.

4. Purge. Now’s the time to sell, donate or give away as much of your personal possessions as you can. Use the proceeds to pad your cash cushion, or tuck the donation receipts away for your tax records next year.

Start here, and chances are good that your house hunt — and purchase — will be in full swing by spring, if not sooner.

Tara-Nicholle Nelson is an author and the Consumer Ambassador and Educator for real estate listings search site Trulia.com.

Managing your finances before homeownership to save your home from a foreclosure

Are you planning to purchase a new home? If yes, you have to buck up your finances so that you don’t fall in trouble in the near future and then risk losing your home to a forced foreclosure. Managing your finances is the most important job that you have to do when you plan to take out a home mortgage loan from a bank. The mortgage loan entails your home as collateral so that when the borrower defaults to make the payments on time, the lender can foreclose the house and recuperate the money. “How much house can I afford” is the most important question a borrower should ask himself before taking the plunge. Here are some important steps that you should take in order to manage your finances once you plan to take out a home loan.

Stop all the unnecessary expenses: Whenever you contemplate buying a new house and forget paying further rent, you should stop making all the unnecessary expenses that you can do without. If you don’t read magazines, stop the monthly subscriptions to magazines. If you can cook well, stop dining out every weekend as this will save your dollars in the long run. You can even do without the cable connection at home. If you can build an emergency fund, you can easily take out a mortgage loan at an affordable rate.

Stop using your credit cards: Are you aware of the fact that the mortgage lender will check your DTI ratio or the debt-to-income ratio that is the ratio between the total monthly debt obligations with your monthly income. If you keep on purchasing things with your credit cards, you’ll drown in unsecured debt and thereby be forced to take out a home mortgage loan at an unaffordable interest rate. Therefore, stuff your wallet with cash so that you may stop buying things when you’re exhausted.

Save enough money: Yes, this is the ultimate secret that will take you to the path of a smooth mortgage loan approval. The mortgage loan underwriter will check the amount you’re paying down while taking out the loan amount. The more you pay down, the lower will be the rate offered to you. You should save enough money so that you can at least pay down 20% of the loan amount and avoid paying PMIs later on.

Keep track on your credit score: Don’t take any wrong step that can hit your credit score. Pull out a copy of your credit score time to time so that you know where you stand financially. Repair your credit as much as possible so as to grab the best mortgage loan at the most covetable cost.

When you’re dreaming of homeownership, make sure you follow the money tips mentioned above. By taking all the tips mentioned above, you can get the most appropriate loan in accordance with your affordability. Don’t forget to ask yourself “how much house can I afford” before taking out the loan.

Interest rates are hovering around historical lows, and low interest rates increase affordability, making it easier for buyers to qualify. Yet stories of buyers waiting months to gain loan approval and home purchase transactions not closing on time due to lender’s strict underwriting are all too common.

Some buyers are turned down for illogical reasons. For instance, if you have investments — even if they’re performing well — an underwriter might deny the mortgage because your portfolio doesn’t fall into the underwriter’s risk assessment model. One couple was turned down because the husband had worked at his current job for less than a year — even though he was making more money at the new job than he was before.

These buyers were well-qualified. The wife had worked several years for one employer and was able to qualify for the loan on her own. So, the transaction closed, although two months late.

Generally, it’s more difficult to qualify now than it was a year ago. Most conventional lenders require a 20-25 percent down payment. For the lowest interest rates, your credit scores need to be in the 700 range. You need to have verifiable income and cash reserves in addition to your down payment and closing costs.

You could run into underwriting problems if you’re self-employed, as W-2 income is much easier to verify. Other hurdles are lapses in employment and owning a lot of property. Some lenders won’t lend to buyers who have more than three or four residential properties.

If you’re buying a new home before selling your current home, you’ll need to have 30 percent equity in your current home. This needs to be verified by the lender’s appraiser. Also, the lender will want to see a copy of the cashed check from the tenant for the first month’s rent to verify rental income if needed to qualify.

HOUSE HUNTING TIP: As soon as you’re serious about buying a home, find the best mortgage broker or loan agent you can to assist you. Don’t make your selection based on interest rates alone. A good track record counts for a lot.

Closing the deal should be your primary goal. If you have to pay 0.25 percent more to assure your transaction closes on time and that you’re not turned down at the last minute, it’s worth it.

Be candid with your loan professional about anything in your financial picture that might impact loan qualification. A good loan agent or broker will be able to assess your financial situation and anticipate what you’ll need to do to satisfy the underwriter.

Be aware that appraisal issues can impact your loan approval. For example, if a previous owner added square footage without a building permit, the additional square footage probably won’t be included as livable square feet.

If the appraisal comes in for less than the purchase price, the lender might not lend you enough to close the deal. Include an appraisal contingency in your contract.

There are more jumbo financing options available now. Adjustable-rate mortgages that are fixed for 10 years and then revert to an adjustable have a starting rate about 0.25 percent less than a 30-year fixed jumbo. A five-year fixed starts about 0.5 percent to 0.75 percent lower, but is riskier.

THE CLOSING: Because of the risk factor, the lender may want you to have a large cash reserve. Your retirement account counts toward this.

Dian Hymer is a real estate broker with more than 30 years’ experience and is a nationally syndicated real estate columnist and author.

Sales of previously owned homes got an unexpected boost last month while the number of homes on the market continued to decline, according to data released Monday by the National Association of Realtors (NAR).

The trade group recorded a 1.4 percent month-over-month increase in existing-home sales in October, pushing the annual rate of sales to 4.97 million. NAR’s latest reading is 13.5 percent above the 4.38 million-unit sales pace in October 2010.

Housing inventory fell 2.2 percent to 3.33 million existing homes available for sale as of the end of October, which represents an 8.0-month supply.

That’s down from an 8.3-month supply in September. NAR says the housing supply has been trending gradually down since setting a record of 4.58 million in July 2008.

Distressed homes – foreclosed REOs and short sales – slipped to 28 percent of October’s transactions, down from 30 percent in September. They were 34 percent in October 2010.

NAR says 17 percent of last month’s existing-home sales were foreclosures and 11 percent were short sales.

Market analysts were expecting up to a 3 percent drop in overall existing-home sales between September and October. Forecasts ranged between an annual rate of 4.76 million and 4.80 million.

According to NAR, October home sales should have risen higher than the 1.4 percent the trade group recorded.

According to Lawrence Yun, NAR’s chief economist, contract failures reported by Realtors jumped to 33 percent in October from 18 percent in September. Only 8 percent of contracts fell through in October of last year.

“A higher rate of contract failures has held back a sales recovery,” Yun said. “Home sales have been stuck in a narrow range despite several improving factors that generally lead to higher home sales such as job creation, rising rents, and high affordability conditions. Many people who are attempting to buy homes are thwarted in the process.”

NAR’s report shows the national median existing-home price was $162,500 in October, which is 4.7 percent below October 2010.

“In some areas we’re hearing about shortages of foreclosure inventory in the lower price ranges with multiple bidding on the more desirable properties,” Yun said. “Realtors in such areas are calling for a faster process of getting foreclosure inventory into the market because they have ready buyers.”

Yun adds that extending credit to responsible investors would help to absorb distressed inventory at an even faster pace, which he says “would go a long way toward restoring market balance.”

NAR’s data indicates investors purchased 18 percent of homes in October, while first-time buyers accounted for 34 percent of transactions. All-cash sales made up 29 percent of last month’s purchases.

Subscribe via Email

Follow Me On The Web!

Heal from Foreclosure

For a Compelling Guide to weaving through ALL the experiences of a hardship with applications for coping personally and with family: having to sell Your Home is unbelievably lightened! Anyone that would never consider selling their home, this is a MUST read.